Correlation Between Microsoft and Ventana Biotech
Can any of the company-specific risk be diversified away by investing in both Microsoft and Ventana Biotech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Ventana Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ventana Biotech, you can compare the effects of market volatilities on Microsoft and Ventana Biotech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Ventana Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ventana Biotech.
Diversification Opportunities for Microsoft and Ventana Biotech
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Ventana is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ventana Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventana Biotech and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Ventana Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventana Biotech has no effect on the direction of Microsoft i.e., Microsoft and Ventana Biotech go up and down completely randomly.
Pair Corralation between Microsoft and Ventana Biotech
Given the investment horizon of 90 days Microsoft is expected to generate 0.13 times more return on investment than Ventana Biotech. However, Microsoft is 7.64 times less risky than Ventana Biotech. It trades about -0.06 of its potential returns per unit of risk. Ventana Biotech is currently generating about -0.21 per unit of risk. If you would invest 42,729 in Microsoft on August 26, 2024 and sell it today you would lose (1,029) from holding Microsoft or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Ventana Biotech
Performance |
| Timeline |
| Microsoft |
| Ventana Biotech |
Microsoft and Ventana Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ventana Biotech
The main advantage of trading using opposite Microsoft and Ventana Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Ventana Biotech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ventana Biotech will offset losses from the drop in Ventana Biotech's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| Ventana Biotech vs. Active Health Foods | Ventana Biotech vs. Gold Ent Group | Ventana Biotech vs. Profitable Develop | Ventana Biotech vs. American Leisure Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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